Bitcoin hovers below $40,000 as World Bank rejects El Salvador request

·Contributor
·4 min read
Bitcoin enthusiasts at El Zonte Beach in Chiltiupan, El Salvador. Photo: Jose Cabezas/Reuters
Bitcoin enthusiasts at El Zonte Beach in Chiltiupan, El Salvador. Photo: Jose Cabezas/Reuters

The price of bitcoin (BTC-USD) hovered just below $40,000 (£28,633) on Thursday as the World Bank rejected a request from El Salvador to help with the implementation of the cryptocurrency as a legal tender.

The bank said it could not assist El Salvador’s implementation of bitcoin due to the environmental impact of bitcoin mining, and transparency drawbacks. It comes as research from the Financial Conduct Authority (FCA) revealed an increase in cryptoasset ownership in the UK.

"We are committed to helping El Salvador in numerous ways including for currency transparency and regulatory processes," a spokesperson for the international lender told Reuters.

"While the government did approach us for assistance on bitcoin, this is not something the World Bank can support given the environmental and transparency shortcomings."

Bitcoin was trading at around $39,167 on Thursday morning.

Bitcoin hovered just below $40,000 per coin on Thursday. Chart: Yahoo Finance
Bitcoin hovered just below $40,000 per coin on Thursday. Chart: Yahoo Finance

Earlier this month, El Salvador became the first country to adopt bitcoin as legal tender, with its president Nayib Bukele touting the cryptocurrency's potential as a remittance currency for Salvadorans overseas.

The Central American country plans to use bitcoin as a parallel legal tender alongside the US dollar, however, it could now face problems reaching its deadline of ensuring bitcoin is accepted in the next three months after the World Bank’s decision.

El Salvador's finance minister Alejandro Zelaya said on Wednesday that discussions with the International Monetary Fund (IMF) have so far been successful. He said that the IMF was "not against" the implementation of bitcoin.

On Thursday, the FCA estimated that that 2.3 million adults in Britain now hold cryptoassets, up from 1.9 million last year, with increasing numbers to people seeing them as either a complement or alternative to mainstream investments.  

Enthusiasm for cryptoassets is also growing, with over half of crypto users saying they have had a positive experience so far and are likely to buy more, rising from 41% to 53%, the FCA said. Fewer people also regret having bought cryptocurrencies, down from 15% to 11%.

Sheldon Mills, the FCA’s executive director for consumers and competition, said: "The market has continued to grow, and some investors have benefitted as prices have risen. 

"However it is important for customers to understand that because these products are largely unregulated that if something goes wrong they are unlikely to have access to the FSCS or the Financial Ombudsman Service. If consumers invest in these types of products, they should be prepared to lose all their money."

Watch: What is bitcoin?

The price of bitcoin received a boost this week after bullish comments from money manager Paul Tudor Jones and Tesla (TSLA) boss Elon Musk.

Jones compared bitcoin with gold on Monday, saying that it would be a good way to protect his wealth and diversify his portfolio.

“I like bitcoin as a portfolio diversifier. Everybody asks me what should I do with my bitcoin? The only thing I know for certain, I want 5% in gold, 5% in bitcoin, 5% in cash, 5% in commodities. At this point in time, I don’t know what I want to do with the other 80% until I see what the Fed is going to do,” Jones told CNBC’s Squawk Box.

Meanwhile, Musk had tweeted that his electric car company would resume accepting bitcoin once it becomes more environmentally friendly.

Bitcoin mining has previously been shown to use more energy than that of small nations due to the high levels of computer processing power needed.

Read more: Bitcoin price drops as venture capitalist sticks to $250,000 prediction

Cryptos have been boosted by institutional support recently. Several organisations, including MicroStrategy (MSTR), have invested billions of dollars into cryptocurrencies and traditional financial firms like PayPal (PYPL) and Goldman Sachs (GS) started to handle the asset on behalf of clients.

However, according to a Bank of America survey, 81% of fund managers say bitcoin is still a bubble.

Cryptos have faced staunch opposition from governments and central banks which have been keen to regulate digital currencies.

On Tuesday, Bank of England (BoE) governor Andrew Bailey said digital currencies will not get a regulatory "free pass" in the future, despite their potential for innovation, doubling down on his earlier position that bitcoin is not money, and has no intrinsic value because it has no backing.

Watch: What are the risks of investing in cryptocurrency?

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